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Tuesday, June 4, 2013

Investment Banks Moving into Real Estate

The NYT has a very interesting story suggesting that one of the reasons for rising home prices in certain areas is an infusion of Wall Street money:

Large investment firms have spent billions of dollars over the last year
buying homes in some of the nation’s most depressed markets. The influx
has been so great, and the resulting price gains so big, that ordinary
buyers are feeling squeezed out. Some are already wondering if prices
will slump anew if the big money stops flowing.
“The growth is being propelled by institutional money,” said Suzanne Mistretta, an analyst at Fitch Ratings.
“The question is how much the change in prices really reflects market
demand, rather than one-off market shifts that may not be around in a
couple years.”
Wall Street played a central role in the last housing boom by
supplying easy — and, in retrospect, risky — mortgage financing. Now,
investment companies like the Blackstone Group have swooped in, buying thousands of houses in the same areas where the financial crisis hit hardest.
Blackstone, which helped define a period of Wall Street hyperwealth,
has bought some 26,000 homes in nine states. Colony Capital, a Los
Angeles-based investment firm, is spending $250 million each month and
already owns 10,000 properties. With little fanfare, these and other
financial companies have become significant landlords on Main Street.
Most of the firms are renting out the homes, with the possibility of
unloading them at a profit when prices rise far enough.